Eurozone March inflation up 2.5%... war fallout sends energy costs surging

Jumps from 1.9% in February to 2.5% in March in just one month

Energy costs rise from -3.1% in February to 4.9% in March

Eurozone inflation surged to 2.5% in March, as the impact of the war in the Middle East began to emerge.

On the 31st (local time), Eurostat, the European Union (EU) statistical office, announced that the euro area inflation rate jumped from 1.9% in February to 2.5% in March, well above the European Central Bank (ECB)'s 2% target.

This largely reflects the sharp rise in energy prices after the United States and Israel attacked Iran in late February. Economists surveyed by Reuters also expected inflation to surge in March, forecasting a 2.6% increase.

The European statistical office said it estimates the energy component of the March inflation data likely rebounded sharply to 4.9% from -3.1% in February.

In March, price gains in services eased by 0.2% points to 3.2% from 3.4% in February, and prices in food, alcohol and tobacco also fell by 0.1% points to 2.4% from 2.5%, but the surge in energy costs had a major impact.

ECB President Christine Lagarde said last week that the central bank is closely monitoring region-by-region data and would respond with interest rate hikes if necessary, even if the inflation spike proves to be a short-term phenomenon.

The ECB has already revised its medium-term growth and inflation forecasts since the outbreak of the Middle East war this year. The euro area expects economic growth of 0.9% in 2026 and an annual average consumer price index increase of 2.6%.

Kim Jeong-ah, contributing reporter kja@hankyung.com